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MOSL: AUTOMOBILES-Recovery elusive, inventory correction continues-In double-digit decline mode | Risk of one more cut in estimates

Automobiles: Recovery elusive, inventory correction continues; In double-digit decline mode | Risk of one more cut in estimates

 

Our interaction with leading PV/2W/CV channel partners still indicates no signs of demand recovery at retail levels, as inquiries to sales remains tepid. Feedback on pre-festive demand is not very encouraging, partly impacted by floods in several parts of the country and demand deferment in anticipation of some sops from the government. Most OEMs continued their inventory cutting efforts through production cuts in Aug'19. 

• 2Ws: Despite production cuts, inventory remains high due to weak demand. We expect BJAUT's wholesales to decline ~9% YoY in Aug'19 (~14% decline for dom. 2W volumes). TVSL's volumes are estimated to decline ~11% YoY, whereas HMCL's wholesales are estimated to fall ~25% YoY in the month. RE's dispatches are expected to decline by ~21% YoY to 55k units.
• PV demand trend remains weak with inquiries and conversion remaining weak for existing models, though new launches are attracting good response. MSIL's volumes are estimated to decline by ~31% YoY, whereas MM's UV (incl. pick-ups) volumes are likely to decline ~18% YoY. TTMT's PV volumes are estimated to decline ~33% YoY.
• CV retails too remain weak across regions as demand from all major end-user segments remains tepid, resulting in a further increase in average discounts. We expect CV wholesales for AL to decline ~36% YoY (~50% decline for M&HCVs) and for TTMT to decline by 42% YoY due to continued inventory correction.